Japanese disaster could affect Apple, say experts

Gregg Keizer |
March 16, 2011

Shortages in flash memory supply could hit about the time Apple starts making the next iPhone

FRAMINGHAM, 16 MARCH 2011 - Last weeks' earthquake and tsunami in Japan may put a crimp in Apple's supply of flash memory, but its problem will pale in comparison to smaller firms, an analyst said today.

"There's really no current impact to Apple," said Michael Yang, a principal analyst with IHS iSuppli who covers NAND flash memory. "But there may be in two to three months."

The impact delay, Yang explained, is due to the long production cycle of flash memory, which takes about two and a half months.

Concern about potential NAND shortages have centered around Toshiba, the Japanese company that produces about 40% of the world's flash memory. Toshiba shut down its fabrication plants on Monday to assess damage and the impact of the rolling blackouts that have been implemented in Japan because of the crisis at a Fukushima Daiichi nuclear power plant on the northeast coast.

Even a short interruption can have a domino effect, said Yang, depending on where in the fabrication process the memory chips are when a line is shut down. Toshiba has acknowledged that it has lost some of the wafers being fabricated at its main NAND plant near Tokyo.

"We may see a hiccup in NAND supply around the end of April or beginning of May," said Yang today.

Apple is a voracious consumer of NAND: The company uses about 20% of the world's production, said Yang, in its iPhone, iPad and iPod lines. Toshiba and Samsung are the major suppliers of NAND to Apple.

The timing of a potential supply squeeze could impact the next iPhone, Yang said, because that late April-early May timeframe would be about when Apple's contracted manufacturers would start cranking out new smartphones. That's assuming Apple does what it's done in three of the last four years, and launches a new iPhone in June.

"There could be a ripple effect, assuming a supply chain squeeze in May and product coming out in June or July," said Yang.

Brian White, an analyst with Ticonderoga Securities, was more pessimistic than Yang. "Every company will be impacted, no ifs ands or buts," said White of the disruption caused by Japan's multiple disasters.

"It may not just be semiconductors or [NAND] memory, but maybe in much smaller parts, like capacitors or materials used in printed circuit boards, which are in every consumer electronic product," White said.

But if there are shortages of flash memory or other components, Apple will probably weather them better than most companies, Yang and White acknowledged.

"Apple's purchasing power and its relationship with the [NAND] suppliers means it will get priority," said Yang. "There are three other major suppliers of NAND -- Samsung, Hynex and Micron -- and there's enough flex there that it shouldn't be a huge issue for Apple."

"They're better positioned than most because of their size, the contracts they have in place and the success of their products," echoed White.

While Apple may see what Yang called "only a blip" in its ability to acquire NAND flash memory, other companies may find themselves shut out of a tightening inventory. In tablets, for instance, Yang said that while tier 1 firms -- the likes of Apple, Hewlett Packard, Motorola, Nokia and Samsung -- would be at the top of the list, others wouldn't.

"Companies like ASUS and Acer would be some of those that would probably feel the squeeze," said Yang. "But the impact on tier 1 companies should be minimal."